Performance Summary 2012
Read our full Annual Report online at www.bat.com/ar2012 Proud history, bright future
British American Tobacco is a leading tobacco group, with brands sold in around 180 markets. We employ more than 55,000 people and, with over 200 brands in our portfolio, we make the cigarette chosen by one in eight of the world’s one billion adult smokers. Founded in 1902, our Group of companies traded through the turbulence of the 20th century, including wars, revolutions and nationalisations. The Group was first listed in 1912, and today we are one of the top 10 companies listed on the London Stock Exchange and feature in the Fortune 500. We have also had a secondary listing on the JSE Limited in South Africa since 2008. We hold robust market positions in each of our four regions – Americas; Asia-Pacific; Eastern Europe, Middle East and Africa; and Western Europe – and we are leaders in more Like to know more? than 60 markets. Our approach to marketing is second to For more information about our performance, sustainability none in our industry, in brand building, innovation and and financial results please visit responsibility. Our companies adhere strictly to the high standards of our voluntary marketing principles globally. www.bat.com/ar2012 Our four leading brands are Dunhill, Kent, Lucky Strike and Pall Mall – our Global Drive Brands (GDBs). References in this publication to ‘British American Tobacco’, ‘we’, ‘us’, and ‘our’ when denoting opinion refer to British American Dunhill’s roots date back to 1907, where Dunhill Tobacco Tobacco p.l.c. (the Company) (No. 3407696) and when denoting of London Limited was established on Gentlemen’s Row. tobacco business activity refer to British American Tobacco Group operating companies, collectively or individually as the case may be. More than a century later, Dunhill is our premium international brand, embodying the perfect taste, always. Cautionary statement: this Performance Summary is extracted Since its establishment in 1952, Kent has stood for a (without material adjustment) from, and should be read as modern, progressive cigarette. Relaunched in 1997, it has an introduction to and in conjunction with, British American Tobacco p.l.c.’s 2012 Annual Report. The Performance Summary grown very quickly in popularity, backed by innovative is provided for information only and is not intended to be a product offers. substitute for reading the Annual Report. In particular, the Based on its rich legacy dating back to 1871, Lucky Strike Performance Summary does not constitute summary financial statements and it does not contain sufficient information to is the true American original, now a popular choice allow for as full an understanding of the results of the Group throughout the world with a presence in more than and the state of affairs of the Group, and the principal risks and 80 countries. uncertainties facing the Group, as would be provided by the full Annual Report. Shareholders may view a copy of the Annual Pall Mall is the third biggest cigarette brand in the world, Report on www.bat.com or obtain a hard copy free of charge. sold in over 110 markets. For more than 110 years its core If you have sold or transferred all your shares in British American proposition has been centred on rewarding smokers Tobacco p.l.c., you should send this document to the bank, globally with real value offers. stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee. We have many other famous international and local brands, including Rothmans, Vogue, Viceroy, Kool, Peter Photography by David Hares and Mike Abrahams. Stuyvesant and Benson & Hedges. The paper used for this summary is Amadeus 50% Recycled Silk, With our geographic diversity, strong brands, talented which comprises 25% post-consumer and 25% pre-consumer waste, and 50% virgin wood fibre sourced from sustainable people and proven strategy, the Group is well placed to forests independently certified according to the rules of the achieve further success. In particular, we are confident Forest Stewardship Council®. that our investments in both innovative cigarette products and next-generation nicotine and tobacco products will help us drive growth and build shareholder value in the years ahead.
British American Tobacco Performance Summary 2012 From the Chairman
Richard Burrows Chairman
Dear Shareholder The Board has agreed a £1.5 billion share buy-back British American Tobacco delivered strong profit growth in programme for 2013. 2012, achieved through good pricing and an outstanding improvement in operating margin, partially offset by Sustainability adverse exchange rate movements. Difficult trading British American Tobacco was the first tobacco company conditions persist in parts of the world, particularly to publish a social report and I am proud to say that more southern Europe, but these results demonstrate the than a decade later we maintain our strong reputation for Company is in excellent shape and we remain confident corporate social responsibility and sustainability. We were that our strategy will continue to deliver superior selected for the 11th successive year in the 2012 Dow shareholder returns. Jones Sustainability Indexes, which recognise economic, social and environmental performance. Delivering shareholder value This success is reflected in adjusted diluted earnings We have again published a separate Sustainability per share for 2012 rising to 207.5p, an increase of Summary report this year alongside our Annual Report. 7% on last year. You can download this from our corporate website at www.bat.com/sustainability. The Board has recommended a final dividend of 92.7p per share, which will be paid on 8 May 2013 to On track for further success shareholders on the register at 15 March 2013. This takes Reflecting on the success of 2012, let me express the total dividend for the year to 134.9p, an increase of my thanks and appreciation to my fellow Directors 7% on last year, and maintains our target of paying out on the Board, to our Chief Executive, Nicandro Durante, 65% of sustainable earnings in dividends. to management, and to all our colleagues around the world. The Board also approved the continuation of our share buy-back programme in 2012. Between the beginning of Looking forward, I am confident that we have the March and the end of December 2012, almost 39 million strategy, people and resources to continue to deliver shares were repurchased at a value of £1.25 billion, high single figure earnings per share growth in the excluding transaction costs. years ahead.
British American Tobacco Performance Summary 2012 Our year in numbers
Group cigarette volumes, Profit from operations1 (£million) Basic earnings per share (pence) excluding associates (billion)
694 -1.6% 5,412 +15% 198.1 +26% Revenue at constant Adjusted profit from operations1 at Adjusted diluted earnings exchange rates2 (£million) constant exchange rates2 (£million) per share1 (pence)
15,999 +4% 5,970 +8% 207.5 +7% Revenue (£million) Free cash flow (£million) Dividends per share (pence)
15,190 -1% 3,259 -2% 134.9 +7%
10 year dividend per share (pence) Total shareholder return (annual %) FTSE 100 – 1 January 2010 to 31 December 2012 1 January 2003 to The FTSE 100 comparison is based on three months’ 31 December 2012 average values
134.9 50 British American Tobacco 23.1% 126.5 114.2 40 99.5 30 Median 9.2% 83.7 20 10 66.2 55.9 0 47.0 38.8 41.9 -10 -20 -30 2003 200420052006 2007 2008 2009 2010 2011 2012 -40 -50 Upper quartile 134.9 +7% Lower quartile 23.1%
1 Adjusted profit from operations is derived after excluding the adjusting items from the profit from operations. These adjusting items include restructuring and integration costs, amortisation and impairment of trademarks and similar intangibles, goodwill impairment and the Fox River provision. 2 Constant currency provides the information based on a re-translation, at prior year exchange rates, of the current year information.
British American Tobacco Performance Summary 2012 Global Drive Brands 2012 performance
Dunhill Kent Lucky Strike Pall Mall
Cigarettes sold (billion) Cigarettes sold (billion) Cigarettes sold (billion) Cigarettes sold (billion) 49 67 33 83
Volume growth Volume growth Volume growth Volume growth +2% +1% +11% +3%
Number of markets Number of markets Number of markets Number of markets 130+ 90+ 80+ 110+
British American Tobacco Performance Summary 2012 Our regional performance
EEMEA
Western Europe 27% 23% Share of Group revenue Americas Share of Group revenue
23% Asia-Pacific Share of Group revenue 27% Share of Group revenue
Revenue (£m) Adjusted profit1 (£m) Volume (bn) Asia-Pacific 4,214 1,666 188 2011: 4,251 2011: 1,539 2011: 191 Americas 3,460 1,415 142 2011: 3,558 2011: 1,441 2011: 143 Western Europe 3,442 1,186 129 2011: 3,600 2011: 1,228 2011: 135 Eastern Europe, Middle East and 4,074 1,414 235 Africa (EEMEA) 2011: 3,990 2011: 1,311 2011: 236
1 Profit references are based on adjusted profit from operations and therefore exclude the impact of restructuring and integration costs, amortisation and impairment of trademarks and similar intangibles, goodwill impairment, exceptional provisions and gains on disposal of businesses and trademarks.
British American Tobacco Performance Summary 2012 Sustainability overview
Our vision of a sustainable tobacco business is one that manages the impact of its operations and products responsibly today and prepares for a future in which it continues to create value for shareholders as well as being in the best interest of other stakeholders. We were the first tobacco company to publish a social report and our approach to sustainability has been reviewed and refined ever since. Our sustainability agenda today focuses on the five areas of harm reduction, marketplace, supply chain, environment and people and culture – all of which we describe in this section, highlighting our key priorities and issues.
In 2012, we began work on a brand new sustainability agenda that increases our ambition and better measures our impacts. The key areas of our current sustainability agenda will continue to be important, but we want to focus more specifically on the issues that have the greatest bearing on society. We’ll be working with stakeholders to develop our plans and we will report on this in our Annual Report 2013. Harm reduction You can read more about our activities, download our We know tobacco products pose real and serious health Sustainability Summary report and view our sustainability risks and the only way to avoid these risks is not to use video online at www.bat.com/sustainability. them. But many adults choose to smoke, so our top priority continues to be working towards reducing these risks and making available a range of less risky tobacco and nicotine-based alternatives.
Our research and development programme is focusing on tobacco harm reduction and we are exploring a range of reduced-risk tobacco and nicotine products. This includes a nicotine inhalation product being prepared for launch in the UK by our subsidiary Nicoventures and exploring innovative electronic cigarette technologies through our recent acquisition of CN Creative.
Our work with scientists and public health professionals Detailed performance data for 2012 is available at aims to secure widespread support for tobacco harm www.bat.com/sustainability/data. reduction, including the regulatory changes needed to support bringing reduced-risk products to market.
British American Tobacco Performance Summary 2012 Marketplace Supply chain We are proud of the way we do business and we aim We rely on a complex but critical supply chain and we always to be open and honest about our views and need it to be fit for the future. We are using our influence activities within the marketplace. to improve sustainability from crop to consumer.
Like any business, we want to grow our market share. We manage the impacts of our business through But we want to do this by encouraging existing adult our own activities and those of our supply chain. smokers to choose our products over those of our Our environmental management systems meet best competitors, not by trying to increase the number international standards and we developed our supply of people who smoke or how much they smoke. chain sustainability strategy with the help of our internal and external stakeholders. Given the serious negative health impacts of tobacco products, we support balanced regulation and we We don’t own tobacco farms, but we provide agronomy expect high standards of corporate conduct among support through our extension services to over 100,000 those who produce, distribute, market and sell them. directly contracted farmers. Our Social Responsibility in Tobacco Production programme encourages continual To achieve this we focus on three key areas: engaging improvement of the social and environmental performance with stakeholders on industry regulation; responsible of the suppliers we buy tobacco leaf from. marketing and preventing underage access; and fighting the black market in tobacco.
British American Tobacco Performance Summary 2012 Environment People and culture We are working to reduce our environmental impacts Our reputation as a leading employer helps us stand out as we aim for stretching 2030 and 2050 carbon in an increasingly competitive international employment reduction targets. market, and our people are key to delivering our strategy.
In 2012, we also developed new five-year targets for Our focus is on: driving high performance; developing
CO2e, energy and water use, as well as year-on-year the next generation of leaders; valuing the diversity targets for waste. These targets can be viewed online of our employees; encouraging and rewarding at www.bat.com/sustainability/data, where you can entrepreneurial behaviour; and creating an engaging also find more details of our performance in 2012 culture where individuals and teams can be successful. against our key measures. Providing a safe place to work, protecting our To help achieve our challenging new targets, we will employees’ wellbeing and listening to their views be rolling out a number of energy and CO2e reduction are also fundamental. We want a stretching and projects in 2013, and will continue to explore renewable supportive culture founded on personal commitment and low carbon energy options for the longer term. We and responsibility that attracts, engages and retains will also be conducting detailed assessments of long-term the most talented and diverse people. water supply and demand requirements in the ‘high-risk’ places we operate in.
British American Tobacco Performance Summary 2012 Shareholder information
Financial calendar 2013 Listings and shareholder services
25 April Interim Management Statement Premium listing London Stock Exchange 25 April Annual General Meeting (Share Code: BATS; ISIN: GB0002875804) The Banqueting House, Whitehall, London SW1A 2ER United Kingdom Registrar 31 July Half-Yearly Report Computershare Investor Services PLC 23 October Interim Management Statement The Pavilions, Bridgwater Road, Bristol BS99 6ZZ tel: 0800 408 0094; +44 870 889 3159 Final dividend 2012 – dates in 2013 share dealing tel: 0870 703 0084 (UK) For further details, please see ‘Other statutory and regulatory your account: www.computershare.com/uk/investor/bri information’ in the Annual Report at www.bat.com/ar2012 share dealing: www.computershare.com/dealing/uk 28 February Dividend announced (including amount web-based enquiries: www.investorcentre.co.uk/contactus of dividend per share in both sterling and rand, applicable exchange rate and Secondary listing conversion date – 26 February 2013; plus JSE (Share Code: BTI) additional applicable information as Shares are traded in electronic form only and transactions required in respect of South African settled electronically through Strate. Dividend Tax) 28 February – From the commencement of trading on South Africa Registrar 15 March 28 February to 15 March 2013 (inclusive), Computershare Investor Services (Pty) Ltd no removal requests in either direction PO Box 61051, Marshalltown 2107, South Africa between the UK main register and tel: 0861 100 925; +27 11 870 8222 the South Africa branch register will email enquiries: [email protected] be permitted American Depositary Receipts 8 March Last day to trade (JSE) NYSE MKT (Symbol: BTI; CUSIP No. 110448107) 11 March – No transfers between the UK main 15 March register and the South Africa branch Citibank Shareholder Services register; no shares may be dematerialised P.O. Box 43077, Providence, Rhode Island 02940-3077, USA or rematerialised tel: 1-888 985-2055 (toll-free) or +1 781 575 4555 11 March Ex-dividend date (JSE) email enquiries: [email protected] website: www.citi.com/dr 13 March Ex-dividend date (LSE) 15 March Record date (LSE and JSE) Publications 8 May Payment date (sterling and rand) British American Tobacco Publications Subject to shareholder approval the Unit 80, London Industrial Park, Roding Road, London E6 6LS final dividend for 2012 will be 92.7p per tel: +44 20 7511 7797; facsimile: +44 20 7540 4326 ordinary share. Dividends are declared email: [email protected] and payable in sterling except for those Holders of shares held on the South Africa register can shareholders on the branch register in contact Computershare Investor Services (Pty) Ltd using the South Africa whose dividends are contact details shown above. payable in rand. A rate of exchange of £:R = 13.34290 as at 26 February 2013 Like to know more? (the closing rate for that date as quoted For more information about our business please visit on Bloomberg), results in an equivalent www.bat.com final dividend of 1236.88683 SA cents per ordinary share.
British American Tobacco Performance Summary 2012